Industry Reports

Deutsche Bank Reports Summaries

070430 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (4/30/07)

Deutsche Bank - Equity Research

* CONTAINERBOARD

All alone? Packaging Corp has "re-introduced" a $40/ton price hike initiative for May 15. To date, no other producers have announced similar moves. While recycled fiber costs are easing off the recent peak, they remain high by historical standards.  Also, inventories are fairly lean, and domestic box volumes appear to be picking up. The other major issue is strength in the global market. Export volumes are up sharply this year, and export realizations are above domestic prices in a growing number of cases.

* NEWSPRINT

Newsprint prices are reportedly dropping further, due to the downward adjustment of prices on 6-month contracts that were previously based on fixed prices. This is a disappointing end to longer-term contracts that were introduced last autumn to much fanfare. So much for new producer/publisher "relationships."  March consumption at US dailies continued to be weak, falling 8.7% y/y amidst weak advertising numbers. With the C$ regaining strength and high fiber costs, we think further capacity rationalization is inevitable.

* STRUCTURAL PANELS

The structural panel composite price fell $5/mbf to $289/msf last week. The benchmark grade of OSB (7/16" in the North Central region) fell $7/mbf to $146/msf, while plywood prices were mostly flat. Even at a seasonally strong time of year, we still believe OSB is below "delivered cash cost" for many mills and we regard further closures of early generation OSB mills as well as high-cost plywood mills as inevitable.